I grew up thinking that investing in properties is the best thing since sliced bread.
I had a front row seat to the drama unfolding. My parents, both civil servants, sold their first HDB flat for four times the original purchase price after ten years. They upgraded to a condominium which also doubled in value. They were beneficiaries of the asset enhancement system and firm believers that one can never go wrong owning properties.
Singapore is land scarce, my mom would say. We only have so much land and there is only so many more houses we can build. Besides, many of the richest people in Singapore invest in properties anyway. If they are doing it to get rich, why not us?
While it is true that appreciating asset prices has enabled many Singaporeans to upgrade their social economic status, there are also many who have gotten side-tracked in their investment journey when they bought the wrong property. And to say that the rich makes no money mistakes is like saying that the PAP never loses their GRCs – they myth can be easily busted.
Let us indulge in a big dose of Schadenfreude today as we take a look at some spectacular property blow ups.
St Regis Residences, Singapore
Developed by City Development Limited (CDL), the St Regis Residences was touted as the first branded apartment in Singapore. Located next to the St Regis hotel that hosted the Trump Kim Summit in 2018, the condo facilities are touted to be of top notch quality. An on-site 24 hour concierge service attends to the every need of residents.
Of course, such an elevated level of living experience comes with a price. The development was launched in 2006 just before the Global Financial Crisis hit in 2008. The majority of buyers are said to be foreign investors who are familiar with the St Regis brand.
Unfortunately, things did not turn out too well for them. Except for the few lucky owners who flipped their property within the initial few months, most subsequent transactions occurred at a loss. In fact, over the next decade, there were very few profitable transactions in the development.
Some of the more notable losses include a 6,600 sqft penthouse on the 22nd floor that was purchased for $15.18m at launch. Five years later in 2011, the unit was transacted for $13.2m, for a $2m loss (-13%).
Just next door on the same level, a slightly smaller 4941 sqft unit was sold at $14.28m by the developer. In 2015, the owner cut his losses and sold the unit for $9.5m, a staggering $5.3m loss (-37%).
Yet, both transactions pale in comparison when compared to Japanese billionaire Katsumi Tada’s foray into St Regis Residences. In 2007, he paid a record of $4,653 psf for a 6,017 sqft unit also on the 22nd floor. Till date, the unit holds the honour of having both the highest transacted psf price and also the highest absolute price ($28m) in the development.
He then left the unit empty for 8 years before selling it at a ‘bargain’ price of $12.2m ($2,028 psf) (-56%), reportedly to the owner of Yun Nam Hair Care, Andy Chua. There was no caveat lodged on the property for this transaction and it was believed to be an all cash deal.
Katsumi Tada is currently valued at US$2.4b. For someone with that level of fortune, S$15.8m is but chump change. Further exploration revealed that Tada has been buying (and losing money on) penthouses around the world. His unit at Trump International in New York was also sold at a loss and he was reported to have snapped up yet another penthouse in Hawaii last year, setting the highest ever record for a condo in Hawaii.
Tada aside, the most recent four transacted units in 2019 and 2020 were all loss making. A fourth floor unit purchased at $8.44m was sold for $7.78m, while other units were sold for between $250k to $600k below their original purchase price.
The Marq on Paterson Hill
I am a fan of SC Global and Simon Cheong.
The modus operandi of SC Global is deceptively simple. As a developer, they would give you the very best money can buy – the best location, the biggest units and the most luxurious surroundings (Botero statues anyone?). The properties are branded uniquely and units are released selectively into the market. In the words of a property veteran, “They spare no expenses. It would cost them 30% more but they will charge you at least double for it.”
The apartments become Veblen Goods, for which demand increases when price increases. (Think limited edition Birkin bags for her and Richard Mille watches for him). They also become the go-to asset for Ultra High Net Worth (UHNW) individuals looking to park their wealth discreetly. This is especially true for non-Singaporean investors who are unable to purchase landed properties.
First launched in 2007, The Marq on Paterson Hill was SC Global’s flagship development. 66 units on 125,000 sqft of land, the units in the Premier Tower are 3,000sqft in size while those in the Signature Tower come with their own lap pool and are at least 6,000 sqft.
The Marq also holds the dubious honour of having the highest per square foot ever transacted in Singapore. In 2011, a 3,003 sqft unit on the 20th floor of the Premier Tower transacted for $20.5m. This translates to a jaw dropping $6,840 psf. To put things into perspective, at that price level, a 1,000 sqft 4 room HDB flat would cost just a tad below $7m. Try applying for a HDB loan there!
Many of the transacted units at The Marq did not have caveats lodged. This is an indication that the units were paid for in cash and the owners had wanted to keep details of the deals private. Of the information available, nine units were transacted twice and this allowed us to see how much money The Marq has made (or lost) for her owners.
The only bright spark in the list is a high floor unit in the Signature Tower that was purchased for $24.95m in 2007 and sold for $30.4m in 2012. Other than that, every other transaction is a lost making one.
The losses ranged from the almost inconsequential (11th floor unit, bought for $23.23m in 2007, sold for $23m in 2019), to the heart-breaking (the same stack two floors higher, bought for $26.44m in 2008, sold for $21.8m in 2017 – $4.64m loss or -18%).
Percentage wise, an 8th floor 3,089 sqft unit was transacted in 2012 for $15.2m. 5 years later, the same unit was sold for $10.28m, resulting in a 32% loss over five years.
As a home, The Marq would have been perfect. As an investment however, The Marq has put in a very lacklustre performance till date. Most of the current owners are now sitting on paper losses and it might take a while before the prices recover to the heady levels seen at launch.
Without the brand name of St Regis and the hype of The Marq, Chelsea Gardens is a rather nondescript development along Stevens Road. Launched in 1997, the development consists of 40 three and four bedroom units; the smallest being close to 2,000 sqft.
That year, the Asian Financial Crisis ravaged regional economies. The following year, the Singapore economy experienced our second contraction since independence. Property prices took a huge beating then.
Prior to the turmoil, the developer was selling Chelsea Gardens at the $1,800-$1,900 psf range. Two units were transacted at exactly $2,000 psf. At that price, a four bedroom unit would cost in the region of $4m. That is an extremely hefty price tag at that time, considering that a Good Class Bungalow (GCB) can be purchased for around $10m then.
The last unit transacted in 1997 was sold for $1,936 psf. There were no sales in 1998. In 1999 and 2000, the developer managed to sell four units at prices ranging between $1,312 to $1,595 psf. Imagine buying in 1997 and seeing the value of the property drop by a quarter in a couple of years – that would have been a tough pill to swallow.
Things then got even worse for owners. The biggest loss occurred when a third floor unit purchased in June 97 at $3.77m was sold for $1.97m in Oct 04 (-52%).
Due to the small size of the development, there were many years where not a single unit was transacted. However, when units do get sold, it is not uncommon to see owners booking losses of up to $1m after holding on to their property for years.
Barely two weeks ago, Chelsea Gardens saw its first transaction in 4 years when a 2,508 sqft unit on the third floor was sold for $3.8m. The owner of this unit first purchased it 13 years ago for $3.825m in 2007.
The more encouraging amongst you would have declared it a stalemate with the owner breaking even on the original purchase price. I have another take on this – had the owner been more discerning with the choice of property, he or she could easily have doubled the initial amount in the following 13 years.
It is not only the well-heeled who buy into District 9/10/11 who lose money on properties.
The Sky Habitat debacle will prove to be highly instructive for property investors. Long story short, Capitaland over-bidded for a piece of land within walking distance to (read: not above, not next to, but a ten minute walk away from) Bishan MRT, paying $118m or 20% more than the next highest bidder. To salvage the situation, they roped in Moshe Safdie (Marina Bay Sands and much later, Jewel Changi Airport) to design an archaic structure (that really won’t look too out of place in North Korea) housing 509 apartments. They further piled on the marketing dollar, building a model that reached so high into the sky that it required balcony boxes for potential owners to examine it clearly.
The launch was a raging success. Capitaland succeeded in whipping buyers into a frenzy and they managed to offload more than a hundred units at an average price of $1,700 psf in 2012. Buyers, many of them HDB upgraders, paid sky high prices for the chance to own a piece of the sky. Sadly, they were bought back to earth in a thumping move when the developer relaunched Sky Habitat two years later at prices averaging $1,300 psf.
While the sums involved may not be as hefty as the previous projects, owners at Sky Habitat have seen their fair share of losses. A 24th floor unit bought at the initial launch for $1.928m sold for $1.82m in 2018 (-6%). Its next door neighbour incurred an almost $300k loss when it was sold for $1.208m in 2017.
Even till now, prices have yet to creep back up to their launch levels. The two most recent transactions saw both owners taking a loss on their sale. In May, a high floor 710 sqft unit was sold for $1.08m. It was purchased initially for $1.239m (-13%). Just last month, a bigger 1,216 sqft unit on the 21st floor was transacted for $1.85m, just a tad below its initial purchase price of $1.862m (-1%).
Not All Properties are Good Investments
I can go on and on. There are many more developments such as Orchard Residences, One Shenton, Reflections at Keppel Bay, where owners have been sitting on paper losses for the longest time.
And don’t get me started on Sentosa Cove – the amount investors have lost on the island till date would have put many a small country’s GDP to shame. It is a myth to say that you can never go wrong investing in properties in Singapore. Investors would do well not to invest blindly or buy into hype.